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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






2. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






3. The practice of selling essentially the same good to different groups of consumers at different prices






4. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it






5. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF






6. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic






7. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good






8. A good for which higher income increases demand






9. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






10. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






11. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






12. The sum of consumer surplus and producer surplus






13. The marginal utility from consumption of more and more of that item falls over time






14. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






15. The rational decision maker chooses an action if MB = MC






16. The change in quantity demanded resulting from a change in the price of one good relative to other goods






17. Ed = 0 - no response to price change






18. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






19. When firms focus their resources on production of goods for which they have comparative advantage






20. AVC = TVC/Q






21. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






22. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good






23. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






24. Two goods are consumer substitutes if they provide essentially the same utility to consumers






25. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






26. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good






27. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






28. Product demand - productivity - prices of other resources - and complementary resources






29. The ability to set the price above the perfectly competitive level






30. The mechanism for combining production resources - with existing technology - into finished goods and services






31. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






32. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly






33. Entry of new firms shifts the cost curves for all firms upward






34. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






35. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






36. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices






37. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






38. Exists at the point where the quantity supplied equals the quantity demanded






39. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






40. Ed = (%dQd)/(%dP). Ignore negative sign






41. Entry of new firms shifts the cost curves for all firms downward






42. Demand for a resource like labor is derived from the demand for the goods produced by the resource






43. Occurs when LRAC is constant over a variety of plant sizes






44. The difference between total revenue and total explicit costs






45. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






46. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






47. Ed = 1






48. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits






49. Ed > 1 - meaning consumers are price sensitive






50. Es = (%dQs) / (%dPrice)